It sounds like your friend is in a weird complicated annuity, that doesn't mean they're all bad. But you insist on just lumping them together.That sounds about right. My friend was told when she handed over her money she'd get some 25 or 30 percent bonus premium and then 10% per annum on top of that with "downside protection." I told her it sounds too good to be true. Don't buy it. If it were true, everyone and her mother would be buying those things.But that doesn't answer your question, which was why people buy annuities. I think only a small percentage of those who buy annuities buy them to protect against the risk of living too long and running out of money, or having to live meagerly for fear of living too long and running out of money. I think that most people who buy annuities don't buy conventional annuities where they give the insurance company a big check and the insurance company gives them (or them and a significant other) a small check for life. Instead, they buy investment-type annuities where they pay 2.5% to 3% a year in order to turn their dividends and capital gains into ordinary income and give up the basis step-up at death. If they buy them in an IRA they incur the same costs but don't get to turn the dividends and capital gains into ordinary income. They're sufficient complicated that I think most buyers don't understand them. They may think they were buying mutual funds.
Someone upthread said annuities aren't bought; they're sold. That seems to be spot on, from what I can understand.
Again, do you have ANY insurance? Do you buy car insurance because you think you'll come out ahead? Is your home insurance an investment? I've been paying religiously on my life insurance every year and sure hope I don't cash in on that either.
Statistics: Posted by cshell2 — Fri Apr 05, 2024 1:58 pm — Replies 197 — Views 12319